The Spanish economy has become the most significant among European economies. In 2023, Spanish GDP grew at an annual rate of 3%, compared to 1% for the Eurozone, displacing Germany and France from the continent’s leading economies. The OECD had forecast Spanish economic growth of 2.6% this year and 2% in 2026, in line with government and Banco de España forecasts, but these were recently revised upward again, estimating GDP growth of 2.9% in 2025 and 2.2% in 2026, 3 and 2 tenths higher, respectively, than the previous outlook. Rating agencies have also recently recognized the country’s improved creditworthiness, upgrading its rating. Indeed, the relationship between France and Spain on the cost of debt has now reversed and is lower in Spain, which has improved its ranking: the agencies have downgraded France (from AA to A+) and upgraded Spain’s rating (from A to A+). For The Economist, Spain was “Country of the Year” for 2024. Last year, it recorded the highest growth rate of any OECD economy, including the US, with a 3.2% GDP growth rate, four times the EU average. It achieved these results thanks to several factors: legislation favoring labor flexibility, significant foreign direct investment, the integration of foreign labor, Next Generation EU funds, and an unprecedented influx of tourists. There are many reasons why Spain is experiencing a period of strong economic growth, bucking the trend of its neighbors:

Spain has increased labor market flexibility and streamlined bureaucracy. Furthermore, in January 2023, Prime Minister Pedro Sánchez enacted a dedicated law for the development of startups, providing significant tax breaks and subsidies.

Spain is the fourth-largest country globally for greenfield investments—foreign investments consisting of the construction of new plants from scratch—tied with the United States in the renewable energy sector and fourth in AI and data centers. The government’s position of equidistance—wherever possible—with respect to China and the United States has had a positive impact. In the renewable energy sector, the Chinese company Hygreen Energy will invest €2 billion; Envision Energy plans to build Europe’s first green hydrogen industrial park for €1 billion. According to Spanish Economy Minister Carlos Cuerpo, China “is a key economic partner.”

Spain’s growth has been possible, according to the current government, thanks in part to its migration policies. Madrid, in fact, has planned to regularize 300,000 migrants annually over the next three years to address the labor shortage, estimated at around 250,000 workers annually, due to the aging population and declining birth rate. In 2024, of the 468,000 new jobs created, only 59,000 will go to Spaniards. This is because the new positions are often temporary and low-skilled. Regular immigrants currently represent 13% of the workforce and, according to the Bank of Spain, 20% of GDP growth. Sánchez himself has stated that the country “must choose whether to be an open and prosperous country or a closed and poor one.” The decision to open up has paid off so far.

Tourism has always been one of the strengths of the Spanish economy. In 2024, visitors exceeded 90 million (only France fared better), spending approximately €126 billion. This growth occurred despite a highly uncertain political situation. The Popular Party, winner of the July 2023 elections, failed to secure a governing majority. The king then appointed outgoing Prime Minister Pedro Sánchez, who, for the third time, was able to form a government thanks to an agreement with various pro-independence and nationalist parties. The support of the two main Catalan parties, crucial to the formation of the new Sánchez government, followed the general amnesty of approximately 400 people, including police officers and protesters, for crimes committed between 2012 and 2023.

All of this confirms that Spain is the new locomotive of Europe, thanks to a diversified production model and a more open environment. A model that gives hope for lasting prosperity that can be used as an example.

By Domenico Greco